Financial statements are a useful tool in analyzing your company's financial position and performance. They are comprised of four main components, of which the balance sheet and the income statement are essential. The first item to consider when looking at a set of financial statements is whether these are external financial statements or internal financial statements.

External financial statements

External financial statements are issued for external reporting purposes. They are for investors, tax authorities or other significant partners who require financial information. External financial statements are normally produced on an annual basis, although in some cases (including for public companies) they are produced quarterly. To ensure comparability and consistency, external financial statements are usually based on Generally Accepted Accounting Principles (GAAP) , which has specific requirements that must be followed.